Things haven’t been going to well for the British pub industry. Across the country, thousands of pubs have been forced to shut their doors by high alcohol taxes, duties, and other business-unfriendly restrictions from the state. Even the extended summer and World Cup this year provided little solace to the struggling industry.
Beyond the pain caused by the closing down of local institutions, this also represents a huge threat to the UK economy. According to the Campaign for Real Ale (CAMRA), pubs contribute around £23.1 billion each year. That’s not to mention the community role pubs often play.
While the business environment might be tough, up to a third of the cost of a pint beer can be accounted for by taxation. In effect, the Government has been pushing both an economically and culturally valuable institution to the wall, preventing the British local from diversifying and competing in an ever-changing market.
It was only two years ago that that supermarket alcohol sales overtook those of pubs. On top of high duties, publicans were, and still are, up against businesses that can afford to treat alcoholic drinks as “loss leaders”; supermarkets, for instance, are able to sell drinks at a loss since they can make up for it in the sales of other complementary products.
On top of this, pubs are facing threats from demographic and cultural changes, such as millennials drinking far less than previous generations, or the rise in preference for healthier lifestyles.
Now, I wouldn’t be much of a free marketeer if I didn’t argue that curveballs like the competitive edge held by supermarkets or preferences changing with demographics should be welcomed. Usually, it’s exactly this kind of disruptive change in competition and tastes that stimulates healthy growth and diversification.
Why, then, hasn’t this been the case? Why do so many pub owners simply lock up and sell off in the face of competition, rather than shaking things up to meet new tastes and trump competition from stores?
The first reason may seem pretty obvious: it’s just not worth it. Selling beer to an ever-more-teetotal generation is hard enough without without having to raise the cost of a pint just to meet the tax requirements. With such high costs imposed by the state, and with a smaller consumer market to support them, it’s simply too expensive and risky for landlords to invest in trendier gimmicks for their pubs that might appeal to the new base.
Thankfully, it seems that this message has not gone unheard. In his Budget on October 29, Philip Hammond, the Chancellor, froze duties on beer, spirits, and most ciders and announced a review of the current relief offered to small brewers. Such decisions will make life far easier for pub owners and brewers alike; Brigid Simmonds, Chief Executive of the British Beer and Pub Association, claimed that the freeze will “save brewers, pubs and pub-goers £110 million and secure upwards of 3,000 jobs that would have been lost had beer duty gone up.”
Moreover, the budget also offers to cut the business rates paid by small businesses (including pubs and bars) by a third. Like the frozen duty on beer and spirits, this is a policy that will be warmly welcomed by pub landlords across the country, who will now have more financial freedom to revamp their businesses, and experiment with new gimmicks and trends that can appeal to the new market.
But the focus should be on more than just a disaster averted; freezing duties and cutting business rates is great first step towards a more competitive, revitalised pub industry, but there are certainly more steps to be taken.
For example, policies such as cumulative impact zoning (CIZ), which enables local councils to reject license applications on the basis of alcohol-related harm reduction and local protection from disorderly patrons, make it harder for entrepreneurs to establish new pubs in areas where demand might call for them. With this policy being introduced with the Licensing Act of 2003, it’s high time for an update.
Rather than punishing pub landlords ex ante for crimes they assume their future patrons will commit, the state should instead relax and allow pubs and local communities to shape their own environment. It isn’t fair to simply assume a pub will bring crime and disorder, especially with the aforementioned sensible drinking habits of millennials.
In any case, we can accept this year’s budget as a win for the pub industry, who can now breathe a little easier with their belts loosened. However, if we really want to save the local, we have to constantly be searching for ways to give owners and entrepreneurs more freedom to set up shop and shake up the traditional model of the pub to fit the new generation.
Originally published here